New Study Offers Snapshot Into Fraud

Content Manager

A new study has found that nearly one in three victims of identity theft have chosen to avoid specific merchants after they have fallen victim to fraud.

The 5th Annual LexisNexis Trust Cost of Fraud study found that between 10 and 14 million U.S. consumers are victims of identity fraud each year.

Merchants incur both the amount of chargebacks for which their company is liable,  but they may also pay fees and interest to financial institutions and pay to replace and redistribute lost or stolen merchandise, according to the study.

Findings in the study reveal that merchants are paying more per dollar than they did in 2012, this is the most since 2010, according to the study.

Merchants are also incurring $279 loss for every $100 of fraud losses.  The study attributes this increase in part to the growth of fraud activity through online channels and interest owed to financial institutions, chargebacks and other replacement costs.

As the busy shopping season begins for merchants there are some additional data merchants will want to think about:

  • Since 2012, identity fraud has been trending upward with 12.6 million victims and $21 billion in total fraud.  Incidence rate and total fraud saw a decline between 2009 and 2010.
  • Identity fraud has seen an increase from 12% of all fraud in 2012 to 17% in 2013 for all merchants, but remained stable at 21% for international merchants.
  • There is a higher fraud rate (.74%) for large ecommerce merchants who view fraud prevention as too expensive than those who do not (0.39%).

There are some positive trends for online retailers however,  merchants are losing a lower portion of revenue to fraud this year, which stands at 0.51% compared to 0.54% in 2012.

Large ecommerce and international merchants are taking active stances against fraud by using five versus two fraud solutions, which is more than any other retail category, according to the study.

The study was conducted by Javelin Strategy & Research through an online survey using a merchant panel comprising of 1,139 risk and fraud decision-makers and influencers.   The study uses the LexisNexis Fraud Multiplier to calculate the actual cost incurred by merchants.  It calculates the total cost of fraud shouldered by merchants.

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